Out-of-pocket medical spending will drop for many under Affordable Care Act, study finds

October 1, 2013

Out-of-pocket medical expenses will decline for most consumers who become newly insured or change their source of health insurance under the federal Affordable Care Act, according to a new RAND Corporation study.

The study found that overall the Affordable Care Act will have a varied impact on health spending by individuals and families, depending primarily on their income and whether they would have been uninsured in 2016 without the program.

People who will be newly insured and do not qualify for government subsidies are those who are most likely to see increased total spending as they begin paying premiums for health coverage. Uninsured people who become newly insured under Medicaid will see the largest drop in spending.

Studying Florida and Texas in detail, researchers also estimated consumer spending in states that have chosen to not expand Medicaid. Compared to a hypothetical case in which Medicaid is expanded, the study found that overall health spending will increase for low-income people who remain uninsured or purchase private health insurance in the individual insurance market.

"Among the groups we studied, a clear benefit of the Affordable Care Act is that it will reduce the risk of facing catastrophic medical costs," said Christine Eibner, a study author and a senior economist at RAND, a nonprofit research organization. "Consumers with the lowest incomes will see the most-dramatic reductions of their risks."

Researchers used an updated version of the RAND COMPARE microsimulation model, which predicts the effects of health policy changes at state and national levels, to estimate how the Affordable Care Act is likely to change the out-of-pocket costs (co-pays and deductibles) as well as overall care spending (including plan premiums) for people who will become newly insured and people who will change their source of health coverage.

The study also examined the likely impact of the Affordable Care Act on out-of-pocket spending and the risk of facing catastrophic health costs for low-income people in Texas and Florida, two states that have decided not to expand Medicaid under the Affordable Care Act.

Among the study's findings:

The largest reduction in out-of-pocket spending will be for the 11.5 million consumers who become newly insured under an expanded Medicaid program, with the analysis predicting their annual out-of-pocket medical costs will fall from $1,463 to $34.

The largest increase in overall health costs is expected to be among people who become newly insured on the individual market and have incomes more than four times the federal poverty level. An estimated 3.3 million consumers are expected to spend $7,202 in 2016 under the Affordable Care Act, compared to $5,368 if the law was not in place.

Some low-income people in states that do not expand Medicaid could see higher health spending compared what would happen if Medicaid was expanded. For example, a Texas resident with an income below the federal poverty level who does not qualify for Medicaid will face costs of $1,831 per year, compared to $28 if they were covered by Medicaid.

Nationally, the 11.5 million people who become newly insured by Medicaid will see their risk of spending at least 10 percent of their income on medical costs drop from 45 percent to 5 percent.

Related Stories

Expanding Medicaid in Pennsylvania under the Affordable Care Act would boost federal revenue to the state by more than $2 billion annually and provide 340,000 residents with health insurance, according to a new RAND Corporation ...

(HealthDay)—The Department of Health and Human Services (HHS) announced the federal government will pay 100 percent of the costs of certain newly eligible adult Medicaid beneficiaries under the Affordable Care Act.

States that choose not to expand Medicaid under federal health care reform will leave millions of their residents without health insurance and increase spending, at least in the short term, on the cost of treating uninsured ...

(HealthDay)—Millions of Americans struggle to make ends meet but they don't qualify for Medicaid, the government-sponsored health program for the poor. Yet they don't make enough money to afford private health insurance.

As the key components of the Affordable Care Act roll out this week, more than three-quarters (76%) of U.S. adults are aware of the law's individual mandate, while only four of 10 are aware of the new health insurance marketplaces ...

Recommended for you

It is known that sleep facilitates the formation of long-term memory in humans. In a new study, researchers from Uppsala University now show that sleep does not only help form long-term memory but also ensures access to it ...

Fish oil is one of the most popular dietary supplements in the U.S. because of the perceived cardiovascular benefits of the omega-3 it contains. However, scientific findings on its effectiveness have been conflicting. New ...

A new study by researchers at the University of Colorado, New York University, and the University of North Carolina at Chapel Hill estimates the number of deaths that can be linked to differences in education, and finds that ...

Columbia University scientists have developed a computational method to investigate the relationship between birth month and disease risk. The researchers used this algorithm to examine New York City medical databases and ...

(Medical Xpress)—A team of researchers with Newcastle University in the U.K. has found no evidence of balance or coordination impairments in people watching a stereoscopic (3D) movie on a television screen. In their paper ...

When Americans go out to eat, either at a fast-food outlet or a full-service restaurant, they consume, on average, about 200 more calories a day than when they stay home for meals, a new study reports. They also take in more ...

0 comments

Please sign in to add a comment.
Registration is free, and takes less than a minute.
Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.